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India
OpinionComment
Kamala Thiagarajan
Kamala Thiagarajan

The View | India’s hi-tech joint venture plan is an olive branch to China – but will it work?

  • While the offer is open to other countries, it is most applicable to China, given its dominance in Indian electronics
  • But it remains to be seen whether such a partnership can bolster Indian electronics manufacturing or give greater security to Chinese companies in India

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China’s Xiaomi Corp sells the most smartphones in India and, with its Mi Store on Wheels retail programme launched in September 2020, reaches the remotest parts of the country. Photo: Handout
Kamala Thiagarajan
After years of being accused of protectionism and wariness of Chinese investments, Indian government officials told Economic Times this month that the country was ready to accept proposals for hi-tech electronic joint ventures from not just mainland China but also South Korea, Taiwan, Vietnam and European countries. The hope is that this will bolster the growth of India’s electronic manufacturing.
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While companies such as Xiaomi, OnePlus, Apple and Oppo have invested in India, this has mostly been through their contract manufacturers – where the manufacturing process is outsourced to Indian companies.

The proposal is far more applicable to China, given its dominance in Indian electronics, but there are strings attached – the foreign companies cannot set up independently. They must join hands with an Indian partner which will hold a majority stake and control the board.

This volte-face policy change, even in the face of Sino-Indian border skirmishes, is not surprising, industry insiders say. For one, there’s India’s growing reliance on Chinese goods, which surged last year.
China’s vice-like grip on India’s electronic manufacturing shows no sign of easing. For the year ended March 31, 2020, 45 per cent of India’s imports of electronic components for smartphones came from China. Last year, India imported US$26.39 billion worth of electrical and electronic components from China, up from less than US$18 billion the year before, according to the UN Comtrade database.
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One important reason is price: it is at least 30 per cent cheaper to import components from China than any other competing global supplier.

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